My oldest son, Charles, is seven years old and still has only a nebulous idea of what I do professionally. He knows I “go to an office to make money” and that this involves staring at a set of monitors all day. But he has no real clue as to what I’m actually doing when I’m squinting at the screens and pounding out orders, and I can tell that he’s too embarrassed to ask.
Every boy ought to understand what his old man does for a living. So, last night, I decided to sit him down and explain it.
Me: “Charles, do you understand what I do at work?”
Son: <Somewhat sheepishly> “Um… make money?”
Me: “Right, right. That’s what everyone does at work. But do you know what I actually do when I’m in the office?”
Son: <Embarrassed pause>
Me. “You like Nintendo, right?”
Son: <Suddenly perks up> “Yes!”
Me: “Well, our family owns a tiny little piece of the Nintendo company.”
At this point, I really have his attention. A little light flips on behind his eyes; suddenly my son feels pride in being the owner of a little piece of Super Mario Brothers and Zelda.
Son: “But… how?”
Me: “The Nintendo company is dividend into millions of pieces called ‘shares of stock.’ We own some of those.”
Son: <Enthusiastically nodding>
Me: “You understand what a market is, right?”
Son: “Um… it’s like a store where you buy stuff.”
Me: “Exactly. There is a market for shares of stock — the stock market — and that is where I buy the little pieces of the Nintendo company. That’s what I do at work. I help other families buy little pieces of companies that I think will make them money.”
By now, the wheels in his head are really turning. He turns away for a minute, lost in thought, before turning back to me with a very serious look on his face and his hand balled into a fist.
Son: “But Dad, if we only have a little piece of Nintendo… why don’t we buy a lot more and then DESTROY the other owners?”
He pounded his fist on the table for emphasis.
I didn’t have a good answer for him other than “Son, it’s not a win/lose game with the other investors. We can all make money together.”
Clearly, my son is not destined to be a passive indexer. He appears to have the killer instinct of hedge fund master of the universe.
‘Atta boy!